In This Post:
Authorised Banks
Eligibility For Agricultural Credit
Purposes of Agricultural Credit
Main Types Based on the Payback Period
Loan Limit for Agriculture Financing
Queries for Agri Finance in Pakistan
It is no secret that Pakistan’s economy is predominantly driven by the agricultural sector, and more than half of the nation relies on this sector for their livelihood. At the same time, most farmers in the country have limited resources and need both short and long-term loans to meet their requirements. So, agri financing in Pakistan is a popular way of investing capital in agricultural land, farming tools, machinery, cattle, and other associated equipment, provided that you know when to invest, how much, and where.
We had previously listed all the banks that provide agricultural loans in Pakistan and provided a brief insight into agri financing. This blog is, however, focused on answering some of the most popular questions asked by our readers about agricultural loans in Pakistan.
So, without further ado, let’s get financing!
FAQs about Agri Financing in Pakistan
Generating capital for your business is the biggest challenge for most entrepreneurs in Pakistan since it requires a lot of research and deliberation. Some people merely give up on your idea without knowing the details. But you don’t need to worry. We’ve skimmed all the important information for you and carefully shortlisted the questions that are asked most by the contributors on Zameen Forum.
That said, here’s our compilation of some FAQs about agri financing in Pakistan:
- Which Banks are Authorised to Provide Agricultural Loans?
- Who is Eligible For Agricultural Credit from Banks?
- For What Purposes Do Banks Provide Agricultural Credit?
- What are the Main Types of Loans Based on the Payback Period?
- What is the Loan Limit for Agriculture Financing?
- Who to Approach with Queries for Agri Finance in Pakistan?
Which Banks are Authorised to Provide Agricultural Loans?
According to the State Bank of Pakistan (SBP), all banks in Pakistan have the authority to provide agricultural credit to farmers or producers. It is important to know that the SBP hasn’t placed any restrictions on any institution from providing agrarian credit. A few banks that are specifically mentioned by the SBP are:
- Two specialised banks, including ZTBL and PPCBL.
- Five major commercial banks of Pakistan, including Allied Bank Limited, Habib Bank Limited, Muslim Commercial Bank, National Bank of Pakistan, and United Bank Limited.
- Some other private commercial banks, including Askari Commercial Bank, Bank Al-Habib, Bank Al-Falah, My Bank, Faysal Bank, Habib Metropolitan Bank, and PICIC Commercial Bank. Meanwhile, KASB Bank, Prime Commercial Bank, Saudi Pak Commercial Bank, Soneri Bank, Bank of Khyber, Bank of Punjab, and Standard Chartered Bank of Pakistan are also on the list.
Who is Eligible for Agricultural Credit from Banks?
So far, the most popular question about agricultural loans in Pakistan revolves around eligibility criteria. As per the agricultural loan policies drafted by the State Bank of Pakistan, any individual in the business of farming, livestock, or fishing is eligible to apply for agri financing. Further, corporate firms or cooperative bodies are also granted agricultural loans.
Basically, any individual or company can apply for agri credit in Pakistan, provided they have enough knowledge and relevant experience in livestock, fishing, or farming. Meanwhile, traders, intermediaries, or any entities involved in trading or processing of farming products are not eligible for agri financing under the policies of the SBP.
Any such activities that mainly deal with the processing, packaging, or marketing of agricultural products are covered under commercial or small and medium-sized enterprises (SME) financing.
On the other hand, farmers or corporations that draw agricultural loans in Pakistan are allowed to extend their business and get engaged in farming and trading activities simultaneously provided they are mainly using their own production. Simply put, 75 percent of the agricultural products that they are either marketing, processing, or packing should be procured from their own farms.
For What Purposes Do Banks Provide Agricultural Credit?
As per agri financing policies by the SBP, farming credit that is provided by banks comprise a complete value chain of activities from farm to table [under the circumstances mentioned above]. Banks can grant finance under:
- Production loans (seed, fertiliser, and pesticide)
- Development loans (tractors, tube wells, machinery, and equipment)
- Corporate farming
- Marketing
- Cold Storage and Go-downs (on or off farms)
In addition to the above, agricultural loans are also granted to non-farming businesses such as poultry, dairy, forestry, apiculture (beekeeping), sericulture (silk farming), floriculture (flower farming), and horticulture (gardening). Meanwhile, agri credit is not granted to individuals dealing in the procurement of fruits/crops or any activity related to commercial or SME financing.
What are the Main Types of Loans Based on the Payback Period?
Agricultural loans in Pakistan comprise three types of loans based on payback period:
- Short-term loans are provided for working capital and can range up to 18 months
- Medium-term loans are mostly drawn from banks for meeting developmental requirements and are mostly paid within 1.5 years to 5 years
- Long-term loans are also granted for developmental requirements and can be paid in 5 to 7 years
What is the Loan Limit for Agriculture Financing?
As per the Agriculture Finance Department of the SBP, there is no limitation on agricultural loans. However, the loan amount is assessed by branch managers depending on the financial position of an individual/corporation.
Who to Approach with Queries for Agri Finance in Pakistan?
In case you have any question, suggestion, complaints, or proposals about Agri credit in Pakistan, you can contact the people mentioned below:
- Contact Person: Mr. Muhammad Ashraf Khan
Contact number: 021-9217216
Email: ashraf.khan@sbp.org.pk
- Contact Person: Mr. Kamran Akram Bakhshi
Contact Number: 021-9217241
Email: kamran.akram@sbp.org.pk
Further, the SBP has also established Local Credit Advisory Committees, including representatives of the farming community. The committee is chaired by Chief Managers across the country and conducts periodic meetings to discuss and review issues related to agro-business and their solutions. Some of the offices are located in SBP: Bank Service Corporations in Karachi, Lahore, Islamabad, Quetta, Peshawar, and Islamabad. Multan, Faisalabad, Bahawalpur, Sialkot, D.I Khan, Muzaffarabad, Gujranwala, Hyderabad, Sukkur, and Rawalpindi are also added on the list.
This wraps up our post on FAQs about agri financing in Pakistan. If you have any further questions, you can write to us at blog@zameen.com. Before we sign-off, we would like to tell you that our farming community lags in terms of the knowledge of agricultural loan schemes and programmes. Thanks to the new policies of the State Bank of Pakistan, the farming community is now able to meet the pace of this growing sector. SBP arranges different training sessions and makes sure their offers and initiatives reach the length and breadth of Pakistan.
Meanwhile, if you want to find out about car loans, then you can navigate to our recently published blog on auto loans in Pakistan. We have also compiled a list of banks that provide home loans in Pakistan if you want to buy a property.
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Disclaimer: All the answers in this blog are compiled with the help of the Agricultural Credit Department that operates under the jurisdiction of State Bank of Pakistan. Policies for agricultural loans might differ from bank to bank.
